There are certain rights provided by the California Labor Code that employees cannot waive, including some of the following:

1. Minimum wage
Labor Code Section 1194 provides a private right of action to enforce violations of minimum wage and overtime laws. That statute clearly voids any agreement between an employer and employee to work for less than minimum wage or not to receive overtime.

2. Overtime
In Gentry v. Superior Court, the Supreme Court explained:

[Labor Code] Section 510 provides that nonexempt employees will be paid one and one-half their wages for hours worked in excess of eight per day and 40 per week and twice their wages for work in excess of 12 hours a day or eight hours on the seventh day of work. Section 1194 provides a private right of action to enforce violations of minimum wage and overtime laws.

By its terms, the rights to the legal minimum wage and legal overtime compensation conferred by the statute are unwaivable. “Labor Code section 1194 confirms ‘a clear public policy . . . that is specifically directed at the enforcement of California’s minimum wage and overtime laws for the benefit of workers.’”

3. Expense reimbursement
Labor Code section 2802 requires employers to reimburse its employees for “necessary expenditures or losses incurred by the employee” while performing his or her job duties. Labor Code section 2804, clearly provides that an employee cannot waive this right to be reimbursed for or liable for the cost of doing business. Section 2804 provides, “Any contract or agreement, express or implied, made by any employee to waive the benefits of this article or any part thereof, is null and void….”

4. Right to receive undisputed wages
Under Labor Code section 206.5 employers and employees may not enter into agreements that waive the employee’s right to receive wages that are undisputed. Labor Code section 206.5 also provides that an employer may not require “as a condition of being paid, to execute a statement of the hours he or she worked during a pay period which the employer knows to be false.”

5. Right to participate in Private Attorneys General Act (PAGA) representative actions?
The California Supreme Court held that employees may not waive their right to bring a representative action under the PAGA (even though the Court held that class action waivers in arbitration agreements are enforceable). The Court held in Iskanian v. CLS Transportation that, “we conclude that an arbitration agreement requiring an employee as a condition of employment to give up the right to bring representative PAGA actions in any forum is contrary to public policy.”

However, the U.S. Supreme Court is reviewing this issue in Viking River Cruises, Inc. v. Moriana, (our analysis on Viking River Cruises is here) which will decide if a California employer may enter into an arbitration agreement that requires the employee to only bring his or her individual claims and cannot bring any representative claims under California’s Private Attorneys General Act (PAGA) on behalf of other employees.  The decision is likely to be issued within the next month.

A number of California companies, especially in the tech industry are facing increased scrutiny over equal pay issues in recent years.  While these types of claims have been hard to have certified as a class action on the federal level, some claims under California’s recent Equal Pay Act are seeing success.  Here are five reminders that employers need to understand about California’s pay discrimination laws and the potential liability they carry:

1.  The technology industry has been especially targeted in California for pay discrimination claims.

In June of 2021, a class action against Google alleging pay discrimination was granted class certification, and the case is likely to go to trial by the end of 2022.  In 2020, a case against Oracle was also granted class certification.  In May 2022, LinkedIn reached a settlement with the U.S. Department of Labor for $1.8 million for 686 female workers in California.  The settlement covered LinkedIn’s engineering and marketing positions in San Francisco and its engineering and product positions in Sunnyvale.

Plaintiffs filed a class action and PAGA lawsuit against Sony Interactive Entertainment LLC, which produces the PlayStation, in May 2022.  The lawsuit alleges that female employees were not equally compensated, were held back from promotions, or were denied promotions based on their gender.  The lawsuit alleges violations of California’s Equal Pay Act, California’s Fair Employment and Housing Act (FEHA), failure to prevent and investigate discrimination, violation of California’s Business & Professions Code section 17200 (Unfair Competition), and claims under the Private Attorneys General Act.

2.  California’s Equal Pay Act.

California’s Equal Pay Act, Labor Code section 1197.5, is directed at ensuring equal pay across genders and race.  The law became effective January 1, 2016.  While it was illegal to pay employees different wages based upon their gender or race already under California law, this law expanded the protection to workers who do “substantially similar” work.  If challenged, employers can justify different pay if the employer can show it is based on one or more of the following factors:

  1. A seniority system
  2. A merit system
  3. A system that measures earning by quantity or quality of production
  4. A bona fide factor other than sex, such as education, training, or experience.

The law also prohibits employers from restricting employees from disclosing their wages, discussing the wages of others, inquiring about another employee’s wages, or aiding or encouraging others to exercise their rights under the new law.

3.  Equal Pay Act claims do not require plaintiffs to prove discriminatory intent.

In granting class certification, the court in the Google case noted that the “EPA provides that ‘[a]n employer shall not pay any of its employees at wage rates less than the rates paid to employees of the opposite sex for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions[.]’” Plaintiffs contend in the case that employees in the same job code perform substantially similar work, women in the same job codes are paid less, and Google does not have an affirmative defense to justify the pay discrepancy.

As the court noted in the opinion, “Since intent is not an element of a prima facie case under the EPA or a disparate impact theory under FEHA,” the evidence submitted by Google’s managers that they did not discriminate in their pay decisions “is irrelevant.”

4.  California has many other laws prohibiting pay discrimination.

Effective on January 1, 2018, Labor Code section 432.3 prohibits California employers from relying on salary history information of an applicant in determining whether to make an offer to the applicant, and in determining the pay to offer.

Fair Employment and Housing Act (FEHA) applies to public and private employers.  FEHA prohibits discrimination of applicants and employees for employers with five or more employees based on a protected category, such as race, religion, or gender.  Any pay discrepancies based on gender violates FEHA.

In addition, employers cannot prohibit employees from discussing or disclosing their wages, or for refusing to agree not to disclose their wages under Labor Code Sections 232(a) and (b). In addition, employers cannot require that an employee refrain from disclosing information about the employer’s working conditions, or require an employee to sign an agreement that restricts the employee from discussing their working conditions under Labor Code Section 232.5.

5. New proposed legislation: AB 1162 for pay transparency.

As discussed above, Labor Code section 432.3 became effective on January 1, 2018, and prohibits California employers from asking applicants about prior salary history.  Section 432.3 currently requires employers to provide applicants a pay scale “upon reasonable request.”  It defines “pay scale” as “a salary or hourly wage range.” More information about Labor Code section 432.3 can be read here.

AB 1162 is a bill currently under consideration by the California state legislature that would amend Labor Code section 432.3 to, among other proposed changes, require employers who have 15 or more employees to publish a pay scale for a position in any job posting.  In addition, employers would be required to maintain “records of a job title and wage rate history for each employee for the duration of the employment plus three years after the end of employment” and must make these open to inspection by the Labor Commissioner.

As we end May 2022 and break for Memorial Day weekend, there were some major case develops within the last week for California employers.  Here are five key highlights California employers need to know about:

1. Naranjo v. Spectrum Security Services, Inc. – Penalties just increased for non-compliant meal and rest breaks. 

This week, the California Supreme Court decided the issue of whether premium wages owed to employees for meal and/or rest break violations that are not paid when the break was missed, would also trigger penalties for wage statement violations under Labor Code section 226 and for waiting time penalties for unpaid wages for employees who leave employment under Labor Code section 203.  The Supreme Court held that the premium wages owed to employees also trigger these derivative penalties under the Labor Code.

Takeaway for California employers:  Ensure proper meal and rest break policies are established because the employees are not only entitled to the premium wages, but if the premium wages were not paid to employees when they did not receive a compliant meal or rest break, the employer will be liability for additional penalties under Labor Code section 226 and waiting time penalties under Labor Code section 203.

2. Pineda v. Sun Valley Packing, L.P. – Another decision invalidating arbitration agreements placed in employee handbooks.

Another California court refused to enforce an arbitration agreement contained in the employee handbook.  In Pineda v. Sun Valley Packing, L.P., the U.S. District Court for the Eastern District of California held that an employer could not enforce an arbitration agreement contained in the employee handbook.   In its ruling, the court quoted Sparks v. Vista Del Mar Child & Fam. Servs. (2021) explaining that:

[t]o support a conclusion that an employee has relinquished his or her right to assert an employment-related claim in court, there must be more than a boilerplate arbitration clause buried in a lengthy employee handbook given to new employees. At a minimum, there should be a specific reference to the duty to arbitrate employment-related disputes in the acknowledgment of receipt form signed by the employee at commencement of employment.

The court ultimately held that, “Here … there was no such reference to the arbitration provision in the acknowledgment form that plaintiff signed, and there was no indication in the handbook itself that by commencing and continuing employment, plaintiff was agreeing to be bound to arbitrate disputes.”

Just another reminder after the Mendoza ruling in February 2022, that California employers must be very careful when placing arbitration agreements in employee handbooks.  Handbooks are not the best mechanism for creating binding contracts with employees, and often times they have language setting forth that the handbook and nothing contained in the handbook creates a binding contract with the employer.

3. Morgan v. Sundance, Inc. – U.S. Supreme Court issues decision on standard to determine if an employer has waived its right to enforce an arbitration agreement by litigating the case too long before moving to compel arbitration. 

 On May 23, 2022, the U.S. Supreme Court issued a decision, Morgan v. Sundance, Inc., regarding the enforceability of arbitration agreements in the employment context (the opinion can be read here).  At issue in the case was the legal standard to decide if an employer has waived its right to compel arbitration if it litigates the case for too long.  In the case, the employer defended the initial lawsuit in court, filing a motion to dismiss and participated in a mediation.  After the motion to dismiss was unsuccessful and the mediation failed, eight months after the lawsuit was filed, the employer brought a motion to compel arbitration.  The employee argued that the employer had waived its right to compel arbitration by participating in the litigation and waiting for so long.  The Supreme Court held that in determining whether a defendant waived its right to compel arbitration, there is no need for the court to find that the actions of the defendant “prejudiced the other party by its inconsistent actions.”  All that would be required to establish waiver is that the party knew of its right to arbitration and acted inconsistently with that right.

The takeaway for employers is that if an arbitration agreement exists with an employee who files a lawsuit, it the employer should take action to enforce the arbitration agreement early in the lawsuit in order to avoid a potential argument that it waived its rights to do so by willingly participating in the lawsuit.

We are still awaiting the U.S. Supreme Court’s decision in Viking River Cruises, Inc. v. Moriana, (our analysis on Viking River Cruises is here) which will decide if a California employer may enter into an arbitration agreement that requires the employee to only bring his or her individual claims and cannot bring any representative claims under California’s Private Attorneys General Act (PAGA) on behalf of other employees.  The decision is likely to be issued in June or July of this year.

4. AB 257  – Bill proposed to create council to regulate California “fast food restaurants.”

AB 257, termed the Fast Food Accountability and Standards Recovery Act or FAST Recovery Act, proposes to establish a Fast Food Sector Council within the Department of Industrial Relations.  The council would be composed of 11 members appointed by the Governor.  The Council would define which fast food restaurants it would regulate, and would set standards for minimum wages, working hours, “and other working conditions related to the health, safety, and welfare of” fast food establishments.  As drafted, the bill defines “fast food chain” as “a set of restaurants consisting of 30 or more establishments nationally that share a common brand, or that are characterized by standardized options for decor, marketing, packaging, products, and services.”  The bill would add another layer of complexity for these restaurants in addition to the existing Labor Code.

5. AB 2188 – Bill being considered by California legislature that would make it illegal for California employers to discriminate against employees for using of cannabis.

AB 2188 proposes to amend Government Code section 12945 to make it illegal for employers to discriminate against employees who use cannabis off the job and away from the workplace.  The bill states that it does not create the right for the employee to be impaired while at work, does not apply to the building and construction trades, and does not preempt state or federal laws requiring employees to be tested.  If passed, this would change the current status of California law.

In 2016, California passed Proposition 64 legalizing marijuana.  Proposition 64 expressly provides that employers may prohibit marijuana in the workplace, and will not be required to accommodate an employee’s use of marijuana.  This is also consistent with the California Supreme Court’s holding in Ross v. Ragingwire Telecommunications, Inc.  In that case the court examined the conflict between California’s Compassionate Use Act, (which gives a person who uses marijuana for medical purposes on a physician’s recommendation a defense to certain state criminal charges and permission to possess the drug) and Federal law (which prohibits the drug’s possession, even by medical users).  The court held that the Compassionate Use Act did not intend to address the rights and obligation of employers and employees, and further noted that the possession and use of marijuana could not be a protected activity because it is still illegal under federal law.

If the bill makes it to the Governor’s desk, he will have until the end of September to sign or veto the bill. Be sure to subscribe to receive updates on this and other bills – we will have a webinar towards the end of the year summarizing the new California laws for 2023.

Have a great Memorial Day weekend!

By Veenita Raj and Anthony Zaller

It is a common argument by plaintiff’s counsel in wage and hour class actions: The employer’s policy that requires the employee to remain on the company premises during 10-minute rest breaks facially violates California law.  Therefore, because the employer has a facially invalid rest break policy, it is a company wide policy that is uniform, and should easily be certified as a class action.

However, there are many cases that support the position that on the premises rest break policy is not facially invalid, and that an on-premises rest break policy, alone, is not sufficient to establish that the employer did not relinquish control as to how the employees spent their rest breaks. The key factor is whether the employer controlled how the employee spent their rest break time, in addition to requiring the employee to remain on premises, such as limiting the employees to stay close to their work area for example.

Augustus v. ABM Security Services Recognized There Exist Practical Limitations Where an Employee Can Go During a 10-minute Rest Break.

In Augustus v. ABM Security Services (2016) 2 Cal. 5th 257, the California Supreme Court held that by requiring employees to remain on call by monitoring a pager during a 10-minute rest break violated California law.  Our prior analysis on Augustus can be read here.  However, the Supreme Court was clear that because the 10-minute rest breaks are only 10-minutes, there are “practical limitations on an employee’s movement.”  The Court continued, “Thus, one would expect that employee will ordinarily have to remain on site or nearby.  This constraint, which is of course common to all rest periods, is not sufficient to establish employer control.”  It was the additional requirement in the Augustus case were the employees had to carry a pager and respond to the employer’s calls during the break that provide the facts for the Supreme Court to hold that the employer violated the 10-minute rest break obligations.

Many Courts have acknowledged the California’s Supreme Court’s holding in Augustus regarding on premises rest breaks:

Hubbs v. Big Lots Stores 2018 U.S. Dist. LEXIS 226096 (C.D. Cal., July 11, 2018): A United States District Court for the Central District of California rejected the argument that a policy requiring employees to remain on the premises during the 10-minute rest break reflects the exercise of employer control that qualifies the time as on-duty work. The Court noted that an employer may not require employees to remain “on call” during a ten-minute rest period, Augustus nevertheless recognized that an employer may require an employee to remain “on premises” during such rest periods. The Court stated that Augustus acknowledged that “employers must . . . relinquish any control over how employees spend their break time” and that “compelling employees to remain at the ready, tethered by time and policy to particular locations or communication devices” imposes job-related duties and constitutes employer control because employees are not “free[] to use rest periods for their own purposes.” That requiring employees to remain “on site or nearby” during a ten-minute break was “not sufficient to establish employer control.”  The Court stated that Augustus concluded that these were short breaks, and this restriction was a “practical limitation[] on an employee’s movement” permitted under California law.

Schmidtberger v. W. Ref. Retail 2021 U.S. Dist. LEXIS 201935 (C.D. Cal., Sep. 28, 2021): In Schmidtberger the court rejected Plaintiff’s contention that a policy of requiring employees stay on the premises during rest breaks is invalid facially. The Court stated that in Augustus, the California Supreme Court explained that “[b]ecause rest periods are 10 minutes in length . . . one would expect employees will ordinarily have to remain on site or nearby.”  This restriction “which is common to all rest periods, is not sufficient to establish employer control.” The Court also noted that multiple federal court have implemented a straightforward interpretation of California law established in Augustus, and have dismissed arguments predicating liability on an employer’s policy of prohibiting off-premises rest breaks.”

Ritenour v. Carrington Mortg. Servs. 2018 U.S. Dist. LEXIS 226668 (C.D. Cal., Sept. 12, 2018): Plaintiffs alleged that the rest break policy was “facially unlawful” under Augustus v. ABM Security Services, Inc., and guidance from the California Division of Labor Standards Enforcement (“DLSE”). After Augustus, the DLSE’s website page of Frequently Asked Questions directly addressed the issue of whether an employer can require an employee to stay on the worksite during a rest period. Citing to Augustus, the DLSE stated, “No, your employer cannot impose any restraints not inherent in the rest period requirement itself.” (See DLSE FAQ #5 here).

The Court held that Plaintiffs failed to show that Defendant’s rest period policy requiring employees to remain on site is facially invalid. The Court held that the policy did not conflict with Augustus and that the California Supreme Court never stated that an employer cannot require an employee to remain on the premises during a rest period. Moreover, the court held that the DLSE’s expansive interpretation of Augustus in a Frequently Asked Questions page is neither binding on nor persuasive to the court. Indeed, the DLSE’s FAQ even notes that “[a]s a practical matter,” when an employee receives a 10-minute rest period, “the employee can only travel five minutes from a work post before heading back to return in time.”

Rodriguez v. Wal-Mart Assocs. 2020 U.S. Dist. LEXIS 247004 (C.D.Cal., Oct. 8, 2020): The Court held that Plaintiffs failed to demonstrate that Defendant had a policy or practice that controlled how or where employees spent their rest breaks or that Defendant failed to relieve Plaintiffs of all work-related duties. At best, Plaintiffs have alleged that Defendant suggested or encouraged ways by which Plaintiffs could take their provided rest breaks. As such, Plaintiffs have failed to plausibly allege a rest break violation.

Videau v. Caritas Mgmt. Corp., 2021 Cal. App. LEXIS 122: Unlike the employees in Augustus, the employee in this case was not on call during his rest periods: he did not carry a pager, walkie-talkie, or radio, nor was he required “‘to remain vigilant, and to respond when needs arise[.]'” Moreover, if the employee’s resting period was interrupted for any reason, “he was authorized and permitted to take his full rest break after the interruption.” “Employers may . . . provide employees with another rest period to replace one that was interrupted[.]”

Bowen v. Target Corp. 2020 U.S. Dost. LEXIS 118914 (C.D. Cal., Mar. 27, 2020):  The Court assessed whether Plaintiffs could state a viable claim based on an “on-premises rest period theory” — the theory that employers who force their employees to remain on-premises for the duration of a rest period effectively fail to provide a rest period at all.  In concluding that Plaintiffs had failed to state a claim, the Court observed that a “rest period” was defined in the Wage Order as “time during which an employee is relieved from all work-related duties and free from employer control.” After the Court defined rest periods, it turned to the California Supreme Court’s opinion in Augustus v. ABM Sec. Servs. to determine whether an on-premises rest period policy constituted sufficient “employer control” to deprive employees of a rest period. Focusing on language in Augustus that practical and temporal constraints common to all rest periods meant that “employees will ordinarily have to remain on site or nearby” and that “this constraint… is not sufficient to establish employer control,” the Court held that Target’s alleged on-premises rest period policy did not constitute sufficient “employer control” to deprive employees of a rest period. As a result, the Court dismissed Plaintiffs’ claims to the extent they relied on an on-premises rest period theory.

While there is case law supporting on-premises rest breaks, this type of policy is routinely challenged by plaintiffs in California, and employers need to review these types of policies with employment counsel before implementing.  This issue is a good example on how a simple sentence in an employee handbook could potentially create huge amounts of liability for the employer.  While there is support from these cases for on premises rest breaks, employers need to review their policies with counsel to ensure compliance with California law.

Mediation is one of the aspects of litigation that can be confusing for parties in a lawsuit, but there are few rules to understand about the process that can make it a lot less daunting.  Mediation is a non-binding meeting where the parties in a lawsuit hire an independent mediator (a retired judge or lawyer) to try to reach a settlement.  Here are five issues a party should understand to be better prepared for a mediation:

1. The mediator will make you feel uncomfortable about your case.

As I wrote in a prior post, a mediator’s only role is to get the case settled.  He or she is not there to be your friend, not to tell you what they feel the case is worth, or to protect your opponent’s position.  Their job is to get a settlement.  Put yourself in the mediator’s position: you have two adversarial parties who hate each other and believe they will win if their case goes to trial.  How, as a mediator, do you get the parties to move off their respective beliefs?  You must attack both sides’ theory of the case by pointing out the weaknesses of each position.

So don’t take the attacks personally, or think that the mediator is only attacking your position.  If the mediator is persuasive about how weak your case is, she is equally persuasive to other side.  Understand that the attacks are not personal, are not necessarily how the mediator perceives the value of your case, but are a tool to get the case resolved.

2.  Before the mediation, set a bottom walk-away number, but also a number that represents a goal.

It is important to know what your last best and final number is prior to going into the mediation.  Steve Pearl, a mediator, explains:

Experienced negotiators will set not only the walkaway numbers beyond which they will not move, but also goals that are better than those walkaway numbers. Parties who set “shoot for” numbers as their reference points typically do better than those who only formulate walkaway numbers.

However, just like almost every negotiation “rule” there are drawbacks in setting a walk-away numbers.  Pearl explains that sometimes parties may have to shift their reference points to resolve the case.  So, parties should have clear numbers set going into the mediation, but must also have a mechanism to reevaluate these goals if the case will not settle within these predetermined numbers.

3.  Understand when being cooperative will help you get a better deal.

A party involved in a mediation must understand that there are two parts to a mediation: (1) the process and (2) the content.  The process is how you interact with the other party: are you cordial or you make small talk?  The content is the subject being negotiated, such as the dollar amounts.  A party that is cooperative about the process and competitive about the content will do better overall in a mediation than compared to a party that is competitive on both the process and content.

Think about how you interact with someone that is simply being a jerk to you on ever single issue, even issues that do not impact the subject being negotiated.  When dealing with the hyper-competitive negotiator, your guard goes up and the negotiation turns more personal.  This is a bad combination for attempting to reach a reasonable settlement.

4.  Understand different negotiating tactics that may be used during the mediation.

As a party, you need to understand from your attorney how the process will work.  Mediators have a number of tactics they may use during the mediation process.  Work with you attorney to understand what tactics may come up during the day, and how your will respond.  Some of these tactics include the following:

  • Negotiating by brackets: Instead of countering with a specific dollar amount, the party counters with range.  Usually the range is express as: “If you agree to come to X, I will agree to go to Y.”  Generally parties look to the midpoint of the bracket being offered as the party’s number being offered.  However, thought must be given into how to respond to brackets.
  • The mediator’s proposal: If the parties come to a standstill in the negotiations, a mediator may attempt to make a mediator’s proposal.  The mediator usually will say that they can attempt to propose a number that is not based on the facts of the case or merit of the case, but solely on their feeling that it would be a number that both sides may accept.  The mediator makes the proposal to each side independently, and each side must respond with a yes to accept the proposal or a no to reject the proposal – and only responds to the mediator so that the other party does not know their response.  If a party rejects the proposal, the mediator does not inform that party if the other side accepted or rejected the proposal.  Sometimes the mediator will give the parties a deadline by which to submit their response – such as 24 or 48 hours.

By understanding some of these tactics prior to a mediation, a party can be much more informed about the process and can make better decisions during the mediation.

5. If you make a “last, best and final offer,” make it your last best and final offer.

Parties’ statements made during a mediation must have credibility.  If you make a “last, best and final offer” during a mediation, and the other side rejects the offer, but you continue to negotiate, you have lost credibility with the other party and the mediator.  As a result, even if you continue to negotiate and truly reach your last, best and final offer, the other side (and the mediator) will not believe that is your final number and will continue to push you beyond this number.  There are occasions to make a last, best and final offer, but if you qualify your offer as such, be ready to walk out of the mediation if the offer is rejected.

On May 12, 2022, Governor Newsom announced that the state minimum wage could increase to $15.50 per hour on January 1, 2023 due to inflation.  However, many California employers are already facing minimum wage increases much earlier – as many local jurisdictions throughout California are raising their minimum wage rates on July 1, 2022.  Here is a list of some local city and counties in Southern California that are set to increase minimum wage rates on July 1, 2022:

Local Government

Minimum Wage Rate as of July 1, 2022

Resources

Los Angeles City $16.04 https://wagesla.lacity.org/

 

Los Angeles County $15.96 https://dcba.lacounty.gov/minimum-wage-for-businesses/

 

Santa Monica $15.96 https://www.santamonica.gov/minimum-wage

 

Malibu $15.96 https://www.malibucity.org/793/Minimum-Wage
Pasadena $16.11 https://www.cityofpasadena.net/planning/code-compliance/minimum-wage-ordinance/

 

West Hollywood $16.50 for employers with 50 + employees; $16.00 for employers with fewer than 50 employees; $18.35 for hotel employees https://www.weho.org/business/operate-your-business/minimum-wage

 

As a reminder, the City of San Diego raises its minimum wage rate on January 1 of each year.  Since January 1, 2022, the City of San Diego’s minimum wage is set at $15.00 per hour.  More information about San Diego’s minimum wage rate can be found here: https://www.sandiego.gov/compliance/minimum-wage.  Also, employers throughout California must review their local requirements – this is just a summary of Southern California increases.

Here are five items employers should consider prior to the July 1 deadline:

  1. Map locations to ensure the company is paying the required minimum wage.
  2. Ensure employees who travel and work in other cities/counties are being paid the appropriate minimum wage.
  3. Ensure pay stubs reflect the increased minimum wage (as well as other requirements).
  4. Update posters to ensure compliant posters are used in the workplace.
  5. Update notices to employee to reflect increased wage rates.

Notices to Employee required under Labor Code section 2810.5 must be issued to all nonexempt employees when they start work.  The wage information section must reflect the higher minimum wage for minimum wage workers as of July 1, 2022.  Accordingly, the overtime rates of pay section of the Notice must also be updated to reflect the higher rates as a result of the higher minimum wage requirements.

On April 21, 2022 the Board for Cal/OSHA approved a third readoption of the Emergency Temporary Standards (ETS) that governs employer’s duties to prevent the spread of COVID-19.  The ETS applies to most employers in California not covered by Cal/OSHA’s Aerosol Transmissible Diseases standard. The new version of the ETS will replace the current version, which expires today (May 6, 2022), and the new requirements are expected to remain in effect until December 31, 2022.

The new ETS relaxes and eliminates some of the existing COVID-19 requirements, incorporates the current masking, quarantine, and workplace exclusion requirements by the California Department of Public Health (“CDPH”), and adds some new definitions and overall provides more flexibility in dealing with the changing landscape of COVID-19. Cal/OSHA is expected to provide guidance on this new ETS in the form updated FAQs. Below are a few noteworthy changes in the revised ETS affecting almost all California employers.

  • CDPH guidance now governs exclusion and return-to-work criteria for close contacts.
  • Fully vaccinated definition is eliminated entirely. Requirements previously limited to unvaccinated employees now apply to all employees. By way of example, the new ETS requires employers to provide respirators to all employees upon request, while the prior version only required respirators be provided to unvaccinated employees upon request. Likewise, the prior ETS only required employers to make testing available to unvaccinated symptomatic employees, while the new ETS requires employers to offer testing to all symptomatic employees regardless of vaccination status. Be mindful that the distinction between vaccinated and unvaccinated may still apply to local public health rules that are more restrictive than the new ETS.  Plan for potential increased testing costs.
  • New Returned Cases definition added: The new ETS creates a limited exemption for testing for COVID-19 cases in the 90 days after the initial symptom onset, or first positive test, if asymptomatic.
  • Return-to-work testing may be self-administered and self-read. The result must include additional independent verification, such as a time-stamped photograph.
  • Face Coverings. The “light test” for cloth face masks (“not let light pass through when held up to a light source”) has been eliminated. In the few remaining situations were face masking is required, the protocols are to be consistent with current CDPH’s requirements.
  • Physical distancing (except during major outbreaks) and physical partitions requirements have been eliminated.
  • Cleaning and disinfecting protocols have been eliminated.

California employers should familiarize themselves with the new ETS requirements and update their written policies to ensure compliance with the new requirements. Given the incorporation of the CDPH guidance, employers should regularly monitor CDPH’s guidance, and watch for  Cal/OSHA’s updated FAQs. Employer also need to stay abreast of local public health regulations that may be more stringent than the ETS and CDPH. Lastly, while many of the ETS requirements have been eliminated or modified, many requirements, including exclusion pay requirements, remain in place through the end of the year.

My firm has officially announced its new service for helping update California employers about new legal developments and trends: Text Brief (subscribe here).  It is a way to share employment law updates with California employers, CEOs, human resource professionals, in-house counsel, any anyone else who needs to stay informed.  Here are five reasons why you should subscribe to Text Brief:

1. It’s free.

Do I need to say anything else?  By the way, when was the last time you heard a lawyer say this?

2. Valuable and exclusive content.

We plan on sending about one text update per week – covering topics such as new case law, upcoming deadlines facing CA employers, proposed legislation, and other updates.  There will be times when major developments warrant more than one text per week, but we will not overload your phone with irrelevant information.  We aim to provide curated content on major California employment updates each week.  Plus, we will be providing exclusive access to information and updates for Text Brief subscribers.

3. Short texts help you decided if you need to learn more or not.

I hear the objections already – why do I need to have a text message sent to my phone?  Well, if you struggle with having email overload, struggle with finding key emails that you want to refer back to, or plan on reading later and never get to it, Text Brief is the solution.  Plus, our short text descriptions about the topic can allow you to decide to continue learning, or simply wait until next week for a topic that you would like to learn more about.

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Do employers need to have a computerized timekeeping system to comply with their requirements under California law?  With technological advances, it is hard to remember that just 10 years ago these questions were on top of everyone’s mind, but today it is sometimes assumed that it must be legal to keep these records electronically.  However, these inquiries raise good questions about employers’ obligations under the Labor Code to create and maintain time records.  Surprisingly (or maybe not so – depending on your views on how slow the law is in adapting to technological advances), the Labor Code does not address this issue right on point.  Yet, there are some governing principles employers can review in making the decision on what practices are best for their business. This Friday’s Five covers five key obligations employers should consider when setting up time keeping systems:

1. Are employers required to use a particular type of timekeeping system?

California law does not require the use of any electronic type of timekeeping system or time clocks.  Employers may elect to use paper and pen in recording an employee’s time.  As explained below, the records should be “indelible,” meaning that the time entries cannot be erased, removed, or changed.  However, even with just a handful of employees, many employers find it more efficient to use an electronic timekeeping system.  Moving towards an electronic time keeping system can reduce mistakes in the recording and calculation of time worked, make it easier to track changes, and could make a review of the time entries easier should there ever be a challenge by the employee about their pay.  Most timekeeping software today will also help monitor meal break compliance and will automatically flag any violations for a manager’s review.

2.  Can time records be kept electronically?

California Wage Orders require that employers maintain the employees time records “in the English language and in ink or other indelible form.”

The Division of Labor Standards Enforcement (“DLSE”) issued an Opinion Letter on July 20, 1995 stating that “storage of records by electronic means meets the requirements of California law if the records are (1) retrievable in the State of California, and (2) may be printed in an indelible format upon request of either the employee or the Division.”

The DLSE issued another Opinion Letter on November 10, 1998 advising employers that the electronic time record data could be maintained outside of the State of California “as long as a hard copy of the records was maintained at a central location within California.”  While the DLSE’s opinion letters are not binding legal precedent, they are given pervasive authority in court.  Thus, employers need to be careful about relying too heavily on these opinions.  In addition, these two Opinion Letters contradict each other.  As set forth below, the Wage Orders require time records “shall be kept on file by the employer for at least three years at the place of employment or at a central location within the State of California.”  Therefore, employers should consider maintaining a copy of employee time records, either electronically or on paper, within the State of California.

Similar language is also found in Labor Code section 226 pertaining to the information required to be provided to employees on pay stubs:

The deductions made from payments of wages shall be recorded in ink or other indelible form, properly dated, showing the month, day, and year, and a copy of the statement or a record of the deductions shall be kept on file by the employer for at least three years at the place of employment or at a central location within the State of California.

On July 6, 2006, the DLSE issued an Opinion Letter permitting employers to issue electronic pay stubs to employees if certain requirements were met.  The DLSE stated:

The Division in recent years has sought to harmonize the “detachable part of the check” provision and the “accurate itemized statement in writing” provision of Labor Code section 226(a) by allowing for electronic wage statements so long as each employee retains the right to elect to receive a written paper stub or record and that those who are provided with electronic wage statements retain the ability to easily access the information and convert the electronic statements into hard copies at no expense to the employee.

The DLSE approves electronic wage statements if the employer incorporates the following features:

  1. An employee may elect to receive paper wage statements at any time;
  2. The wage statements will contain all information required under Labor Code section 226(a) and will be available on a secure website no later than pay day;
  3. Access to the website will be controlled by unique employee identification numbers and confidential personal identification numbers (PINs).  The website will be protected by a firewall and is expected to be available at all times, with the exception of downtime caused by system errors or maintenance requirements;
  4. Employees will be able to access their records through their own personal computers or by company-provided computers.  Computer terminals will be available to all employees for accessing these records at work.
  5. Employees will be able to print copies of their electronic wage statements at work on printers that are in close proximity to the computer or computer terminal.  There will be no charge to the employee for accessing their records or printing them out.  Employees may also access their records over the Internet and save it electronically and/or print it on their own printer.
  6. Wage statements will be maintained electronically for at least three years and will continue to be available to active employees for that entire time.  Former employees will be provided paper copies at no charge upon request.

This same analysis would likely apply to the time records employers are required to maintain under California law.  However, employers need to approach this issue with advice from counsel, as there are no clear court decisions that have approved of the DLSE’s position.

3.  Length of time electronic records should be kept

Employers should also note that the statute of limitations for many wage and hour class actions in California can extend back to four years under Business and Professions Code section 17200; and, therefore should consider keeping wage statements and other documentation required to defend against claims going back the previous four years.

4. Items time records must report (be careful, it is more than just start and stop times)

The Wage Orders require that California employers keep “[t]ime records showing when the employee begins and ends each work period. Meal periods, split shift intervals and total daily hours worked shall also be recorded. Meal periods during which operations cease and authorized rest periods need not be recorded.”  IWC Wage Order 5-2001(7)(a)(3).

Additionally, Labor Code section 1174 requires employers to keep time records showing the hours worked daily and the wages paid, number of piece-rate units earned by, and the applicable piece rate paid.

5. Records must be maintained in California

These records must be maintained in the state or at the “plants or establishments at which employees are employed.”  The records must be kept for at least three years.  Labor Code section 1174(d).

The Wage Orders likewise require that employers keep records “at the place of employment or at a central location within the State of California.” As mentioned above, if employers have electronic records, a copy of the electronic data should be maintained within the state just as a precaution.

As mentioned above, the statute of limitations for wage claims can extend back to four years, so employers generally keep the records for four years.  Employers need to ensure that the data being saved is the actual time records of the employees and can be reproduced in format that is accurate and easy to read, should the records ever be requested or needed to defend litigation.

Employers should remember to take time to review their employee documentation, retention policies, and how this information is being saved on a periodic basis.  Here are five record retention issues employers should audit as of April 2022:

1. Are employee time records maintained for at least four years?

The statute of limitations can reach back four years in wage and hour class actions under California law, and time records will be the primary issues in most cases.  California law requires employers to track start and stop times for hourly, non-exempt employees. The law also requires employers to record the employee’s thirty-minute meal periods. The time system needs to be accurate.  Employers need to be involved in the installation and setup of the system and not simply use the default settings for the hardware and software. Understand what the system is tracking and how it is recording the data.  Employers should also have a complaint procedure in place and regularly communicate the policy to employees in order to establish an effective way to remedy any issues.

2. Are pay stubs and schedules backed-up and saved by the employer? 

Under Labor Code section 226, employers are required to provide employees with pay stubs “semimonthly or at the time of each payment of wages.”   Section 226(a) requires that employers keep a copy of the pay stubs for “at least three years.”  As mentioned above, because the statute of limitations for labor code violations can extend back four years, many employers retain these records for a four-year period.

In addition, employers should also review where and how the pay stubs are being saved.  Electronic copies of the pay stubs are permitted under section 226 as long as the electronic backup accurately shows all of the information required to be on the pay stubs.

Employers should not rely upon their payroll company to retain copies of these documents.  First, the obligation falls on the employer do retain these, and many payroll companies do not necessarily save this information.  Second, if the company changes payroll companies, it may be difficult to access the payroll information from the former payroll company.

Often overlooked, but critical in defending wage and hour lawsuits, are copies of employee schedules.  Given the four-year statute of limitations for wage claims, many employers are also maintaining copies of employee schedules for four years.

3. Are employee files maintained confidentially and for at least four years?

In 2021, California passed SB 807 that amended California’s Government Code section 12946 to require employers to maintain personnel files, among other records for at least four years.  Government Code section 12946 requires that employers “maintain and preserve any and all applications, personnel, membership, or employment referral records and files for a minimum period of four years after the records and files are initially created or received, or for employers to fail to retain personnel files of applicants or terminated employees for a minimum period of four years after the date of the employment action taken.”  While many employers were maintaining personnel files for four years prior to the passage of SB 807 since many wage and hour statute of limitations can extend back four years under California law.

California law does not define the terms “personnel records” or “personnel file,” and this creates considerable ambiguity about what documents should be kept in an employee’s personnel file.
While not legally binding on employers, there is some guidance from the Division of Labor Standards Enforcement(“DLSE”) setting for the following:

Categories of records that are generally considered to be “personnel records” are those that are used or have been used to determine an employee’s qualifications for promotion, additional compensation, or disciplinary action, including termination. The following are some examples of “personnel records” (this list is not all inclusive):
1. Application for employment
2. Payroll authorization form
3. Notices of commendation, warning, discipline, and/or termination
4. Notices of layoff, leave of absence, and vacation
5. Notices of wage attachment or garnishment
6. Education and training notices and records
7. Performance appraisals/reviews
8. Attendance records

Employers should also consider placing the following documents in personnel files:

  • Signed arbitration agreements
  • Sexual harassment compliance records for supervisors
  • Sign acknowledgements of policy by employee (for example, confidentiality/proprietary information agreements, meal and rest break acknowledgments, handbook acknowledgments)
  • Wage Theft Protection Act notice for non-exempt employees
  • If commissioned employee, written commission agreement signed by both the employer and employee beginning January 1, 2013.
  • Warnings and disciplinary action documents.
  • Performance reviews
  • Documents of any grievance concerning the employee
  • Documents pertaining to when the employee was hired
  • Records pertaining to last day of work and documenting reason for departure from employment

Also, remember that employers must keep records of sexual harassment training for supervisors and employees required under California law for at least 2 years. 2 Cal Code Regs §11024(b)(2).

4. Are Forms I-9 being maintained long enough and in a manner that is easily retrievable?

Employers must keep I-9 forms for three years from the employee’s date of hire, or one year after termination, whichever is longer. Employers have at least three business days to produce Forms I-9 during an inspection.  More information about the Form I-9 can be read here.

5. Are managers and supervisors trained about the company’s forms/documents available to them, what must be documented, and who is responsible for saving the documents?

Even if the employer has valid policies about document retention, it is irrelevant if the managers and supervisors are not also trained about the policies:

    • Do supervisors understand which forms are available to them to document discipline, employee absences, and other routine issues?
    • Who is involved in reviewing disability accommodation requests and how are these documented?
    • Do the managers have standard forms for the following:
      • Employee discipline and write-ups.
      • Documenting employee tardiness.
    • How are employee absences documented?
    • How is the employee documentation provided to Human Resources or the appropriate manager?
    • Who is responsible for saving the document in the paper file or electronically?